THE COMPANY: Bangkok Dusit Medical Services (BGH) was established in 1972 and listed on the Stock Exchange of Thailand (SET) in 1991. BGH is now the largest private hospital operator in Thailand in terms of the number of beds, revenues from patient services and market capitalisation.
BGH currently owns and manages 28 hospitals (with a total of 4200 beds), of which 26 are run under five well-known local hospital brands: Bangkok Hospital, Samitivej Hospital, BNH Hospital, Paolo Memorial Hospital and Phyathai Hospital. The other two hospitals are located in Cambodia and operate under the Royal International Hospital brand. BGH has investments in other hospitals and hospital chains as well, namely Ramkhamhaeng Hospital, with a 38.2% holding, Bumrungrad Hospital, with a 20.3% holding, and Krungdhon Hospital, with 20%.
BGH has Joint Commission International (JCI) accreditation, and to date only 16 hospitals in Thailand have been awarded JCI certification, eight of which are under the management of BGH: Bangkok Hospital, Bangkok Heart Hospital, Wattanosoth Hospital, Bangkok Hospital Pattaya, Bangkok Hospital Phuket, Bangkok Hospital Hua Hin, Samitivej Sukhumvit Hospital, Samitivej Srinakarin Hospital, Samitivej Sriracha Hospital and BNH Hospital.
The number of foreign patients that received treatment at BGH hospitals accounted for 26% of total patient numbers in 2011 while foreign patients accounted for 74% of the total revenues.
DEVELOPMENT STRATEGY: BGH is still in the value-creation phase through synergies from the merging of Phyathai and Paolo as well as recent acquisitions. BGH is currently looking for opportunities to acquire new hospitals and has been carrying out feasibility studies to invest in greenfield projects in provinces where there is strong demand for health care but a lack of facilities. Recently, BGH announced it will invest in a greenfield project in Chiang Mai in northern Thailand, where it currently has no facilities. The hospital is expected to have a 200-bed capacity. In addition, BGH has been working with Phyathai and Paolo to set up specialised medical centres.
Thanks to the earnings contribution from Phyathai and Paolo, which BGH acquired in May 2011, benefits from operating and financial synergies, and the robust operations of the company’s existing portfolio, BGH reported a very strong earnings growth of 70% year-on-year in 2011.
With the economy improving and health care supply still limited, particularly in public hospitals, demand for private health care services is continuing to outpace supply. There is much room for long-term industry expansion, and the middle-market segment will enjoy higher growth rates, particularly upcountry. BGH will be the largest beneficiary of the country’s private health care sector.
The reasons behind BGH’s strong growth are manifold. First, BGH has a strong service network, with 26 hospitals located in 11 provinces, and high upcountry exposure, with 43% of its beds located in the provinces. Second, many of BGH’s hospitals are located in foreign tourist destinations such as Pattaya, Hua Hin, Phuket, Hat Yai and Samui. It will therefore also gain from increasing tourist numbers. Third, BGH will further benefit from operational leverage due to its rising asset turnover. Lastly, BGH has reached a point where it can take advantage of consolidation.
Meanwhile, the more rationalised health care market, due to cross shareholdings, will also enhance BGH’s pricing power and procurement power.
Thanks to BGH’s strategy of gaining more market share through acquisitions and new greenfield investments upcountry, it will enjoy the strongest earnings per share (EPS) growth at a 23% three-year EPS compound annual growth rate between 2012 and 2014. With solid and sustainable earnings growth as well as a strong services network, BGH will come out top in terms of profitability improvement. Return on equity is forecast to rise from 15% in 2012 to 20% in 2015.
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